The Chinese yuan surged against the dollar after hints at more liberalisation

A clerk counting Chinese 100-yuan banknotes at a branch of China Construction Bank in Nantong.
Thomson Reuters
The Chinese yuan climbed 0.61% against the dollar on Friday. That might not sound like a lot, but it's quite a large move for the country's tightly controlled currency.

According to Fast FT, it's one of the yuan's biggest single-day rallies since the currency peg against the dollar was removed 10 years ago. That's off the back of some positive noises about liberalising the use of the currency in the global financial system from China's central bank, the People's Bank of China.

It doesn't seem that long ago that everyone was talking about Chinese devaluation, when the PBOC widened the bands within which the currency was allowed to trade earlier this year.

But that action and the policy line the PBOC is taking now are complementary. The Chinese monetary authorities want to be included in the International Monetary Fund's special drawing rights.

There's a good explanation of that from Citi's David Lubin here, but the short version is that the strict rules on the yuan's use — for example, that it can't be exchanged for other currencies easily — will be relaxed by the PBOC, though not fully abandoned.

The dollar has dropped by more than half a percent against the yuan:

Investing.com

It doesn't outweigh the devaluations seen this summer, however, when the PBOC altered the bands in which the yuan was traded:

Investing.com

But that devaluation didn't change the general trend, which has been toward a much stronger yuan over the long term. In fact, the yuan is the only major currency in the world that has strengthened against the dollar in the past couple of years: